SUPPORTING A CLAIM ON AN income tax return for a medical tax credit is not always easy.
Normally, a medical professional must sign a formal certificate that special assistance is required, and where it should be sought. But the Tax Court of Canada has ruled recently that if other supporting medical evidence is sufficiently detailed, a formal certificate will not be required. This decision may be of assistance to families who have overlooked the certificate requirement.
Maria Lucarelli, a mother in Hamilton, Ont., had claimed a medical expense tax credit for tuition fees she had paid to a specialized private school for her young son, who has been identified as having a learning disability. The Canada Revenue Agency (CRA) had claimed that the letters from professionals provided by Lucarelli were not specific enough to satisfy the certification requirement under the Income Tax Act.
Lucarelli’s son had been diagnosed with a “severe deficit in the area of reading and writing” in a 2007 report by Dr. Nancy Johnston, a registered psychologist affiliated with Brock University. After conducting an extensive investigation, Johnston had written a detailed report, which said that the child “will need some individual learning resource support in order to bypass his areas of problems and increase coping skills and compensatory approaches.” Johnston also had approved a plan to keep the boy at his Montessori school as long as he received remedial assistance, which was provided.
The child had been reassessed in 2008 by teachers at the Dyslexia Resource Centre, a company in the Hamilton area that specializes in helping children with dyslexia. Those teachers had concluded that Lucarelli’s son’s reading skills had not improved significantly since Johnston’s assessment.
In September 2009, Lucarelli searched for another school for her son, as the Montessori school teaches only younger children. She had selected TALC Academy, a private school that specializes in education for children with the same type of learning disability as her son. She paid the school $6,125 for the autumn 2009 term, then claimed a medical expense credit for the tuition on her 2009 tax return.
To support her claim, Lucarelli asked Johnston for a second letter that addresses the services provided by TALC Academy. The psychologist hadn’t known about the school in her original report. Her new letter reads, in part: “The program you described at the ‘TALC School’ follows several recommendations made in my psychological report of 2007. With the attitudinal and academic growth he is currently achieving, I feel confident that a transition to his community school will occur in the near future.”
The Tax Court’s Justice Judith Woods wrote in her decision: “[The CRA] counsel’s argument was that the specialized training that was required was not set out in sufficient detail in Dr. Johnston’s report. Another factor was that the report was prepared two years before the child was enrolled in the TALC Academy.”
But Woods’ ruling concludes that the certificate requirement was “satisfied by a combination of the initial report by Dr. Johnston and the followup assessment by the Dyslexia Resource Centre. Dr. Johnston’s report was very detailed in setting out the exact difficulties experienced by the child, and she suggested that individualized training be provided, which bypassed the problem areas.” The ruling adds that Johnston’s initial assessment and the followup assessment by the Dyslexia Resource Centre “satisfy the certification requirement.” Woods thus has allowed Lucarelli’s appeal.
Christina Tari, a tax litigator with Richler and Tari in Toronto, says that when claiming a medical expense tax credit for “tuition paid to a specialized school, institution or other place, the ideal certificate will be from an appropriate qualified person, will be in writing, will identify the physical or medical handicap, and will identify the school, institution or other place that will offer the care or training that the individual suffering from the handicap needs.
“However,” she continues, “in a case such as [Lucarelli’s], in which there is no ideal certificate recording all this information in one document, the person paying the medical expense may enter as evidence a series of reports and letters, and may enter oral evidence to establish that a particular school, institution or other place provides the care or training that the individual suffering from the handicap needs.”
Tari adds: “The issue here really was that the parent of the child had undertaken the research to find the appropriate institute. If I understand what the [CRA] was saying, it was that the institute maybe should have been [chosen] by one of the professionals [rather than the] parent who made the decision.”
Peter Weissman, a tax specialist at Cadesky & Associates LLP in Toronto, says that because the doctor who filed the original report was a registered psychologist, that should have been all that was necessary: “All the provision requires is that an appropriately qualified person says that the patient requires the services of that special school. It doesn’t require that the school be registered with the CRA, it doesn’t require that the school be approved by the CRA or even audited for what it is that they do _ there’s nothing in [the legislation] that says, ‘And the school is approved’.”
But Weissman adds that he does see problems arise for clients when schools aren’t registered or approved. Generally, the CRA wants more than a letter from a doctor: “They often want confirmation from the school that it provides the facilities the doctor is saying the patient needs.”
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